Key Takeaways
- • Cambridge Associates reports a significant surge in late-stage venture capital co-investments, mirroring earlier peaks in lower middle market co-investments during 2020-2021, according to Scott Martin, head of global co-investments at the firm.
- • Co-investment funds attracted a record $47.3 billion in capital last year (2025), even as broader private equity fundraising declined, demonstrating sustained institutional appetite for this asset class.
- • Allocators are driving co-investment demand through two primary motivations: access to lower fee structures compared to traditional private equity funds and enhanced control over individual investment decisions.
- • NEPC's Josh Beers notes that while baseline co-investment demand remains steady, recent interest in large private technology companies has been inflated by AI-related headlines and fear of missing out (FOMO), rather than fundamental investment thesis changes.
- • Co-investments are functioning as a relationship-building mechanism between general partners and limited partners, with GPs increasingly leveraging LPs' industry expertise and networks to strengthen long-term partnerships.
Summary
Cambridge Associates is experiencing heightened demand for late-stage venture capital co-investments, marking the second major wave of co-investment interest in recent years. Scott Martin, the firm's head of global co-investments, confirmed to Institutional Investor that a "big spike" in late-stage venture deal participation is currently underway, following analogous surges in lower middle market co-investments during 2020 and 2021. This cyclical pattern reflects evolving institutional preferences in the alternative investment landscape.
The co-investment sector has achieved substantial scale. According to PitchBook data, co-investment funds raised a record $47.3 billion in 2025, a remarkable figure given that private equity fundraising overall has contracted during the same period. This divergence underscores a strategic reallocation within institutional portfolios toward co-investment vehicles. Cambridge's co-investment practice, which began operations ten years ago, has experienced consistent year-over-year growth, demonstrating the durability of this trend beyond cyclical fluctuations.
Two primary drivers are fueling co-investment demand among allocators. First, fee economics remain compelling—co-investments typically offer lower fee structures than traditional private equity funds. Second, investors increasingly prioritize direct control over capital deployment and investment selection, a feature traditional commingled funds explicitly restrict. This desire for transparency and autonomy aligns with broader institutional trends toward customized portfolio construction.
At NEPC, a Hightower-owned advisory firm, demand for co-investments has remained relatively stable, though Josh Beers, head of private equity investments, has observed increased inquiries around large private technology companies. However, Beers attributes a significant portion of this interest to AI-driven headlines and FOMO rather than substantive portfolio rebalancing. He noted that co-investments can serve a diversification function, allowing allocators to expand exposure beyond traditional listed and private equity holdings in concentrated technology and AI sectors.
Beyond fee and control dynamics, co-investments function as a structural mechanism for deepening general partner-limited partner relationships. Martin characterizes this dynamic as a "perfect storm" for relationship building, noting that GPs increasingly deploy co-investments to access LPs' domain expertise and professional networks. This collaborative model represents a strategic shift toward partnership-oriented fund structures rather than purely transactional capital relationships.
The co-investment sector has achieved substantial scale. According to PitchBook data, co-investment funds raised a record $47.3 billion in 2025, a remarkable figure given that private equity fundraising overall has contracted during the same period. This divergence underscores a strategic reallocation within institutional portfolios toward co-investment vehicles. Cambridge's co-investment practice, which began operations ten years ago, has experienced consistent year-over-year growth, demonstrating the durability of this trend beyond cyclical fluctuations.
Two primary drivers are fueling co-investment demand among allocators. First, fee economics remain compelling—co-investments typically offer lower fee structures than traditional private equity funds. Second, investors increasingly prioritize direct control over capital deployment and investment selection, a feature traditional commingled funds explicitly restrict. This desire for transparency and autonomy aligns with broader institutional trends toward customized portfolio construction.
At NEPC, a Hightower-owned advisory firm, demand for co-investments has remained relatively stable, though Josh Beers, head of private equity investments, has observed increased inquiries around large private technology companies. However, Beers attributes a significant portion of this interest to AI-driven headlines and FOMO rather than substantive portfolio rebalancing. He noted that co-investments can serve a diversification function, allowing allocators to expand exposure beyond traditional listed and private equity holdings in concentrated technology and AI sectors.
Beyond fee and control dynamics, co-investments function as a structural mechanism for deepening general partner-limited partner relationships. Martin characterizes this dynamic as a "perfect storm" for relationship building, noting that GPs increasingly deploy co-investments to access LPs' domain expertise and professional networks. This collaborative model represents a strategic shift toward partnership-oriented fund structures rather than purely transactional capital relationships.
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